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Tim Freund's Blog

By Tim Freund, CRS, | Broker in 91362
  • Market Forces At Work

    Posted Under: Home Buying in Westlake Village, Home Selling in Westlake Village  |  July 9, 2014 7:58 AM  |  8 views  |  3 comments

    It’s a funny thing this economy of ours; this system of capitalism where the free market drives the movement, prices and value of goods and services.  With real estate, too many homes means prices drop; not enough, prices rise.  The same is true for the labor market.  As the U.S. economy continues its slog forward, adding jobs at retail stores and restaurants, the unemployment rate keeps dropping; 6.1% as of last week.  Yet very few would say they are making what they were before The Great Recession.  The reason?  The vast majority of the jobs being created are in the service industry and therefore not the high paying jobs we need to make life a little easier and allow us to spend a little more freely.  Sure it is better that we work than not, no question, but the value of the American worker has never been lower and when you’re at the bottom, there’s only one way to go and that is up.  How one wonders, is an American worker supposed to compete with a Southeast Asian country paying a dollar a day or an engineer or physician from India earning a fraction of an American engineer or doctor?  Not since the era of the monopoly, when child labor was common and worker safety and a fair working wage, the rallying cry of organized labor, has the American worker been valued less than they are today.  But that I believe, is about to change. 

    In the early part of the 20th century, American business saw more than enough workers to do the jobs required, especially by using women and children who earned much less than men.  But labor law was a new concept.  Once it took hold and sweatshops became factories, suddenly the American workforce gained the upper hand, able to demand a better standard of living, a higher scale of pay. 

    The root concept for this shift in the working man’s ability to command better wages, was the shortage of available labor, supply and demand.  Take away the kids and now you have to pay someone who won’t work for pennies a day.  It is this concept that we hopefully are finding ourselves on the precipice of once again: as the unemployment rate drops, competition for skilled labor increases.  More companies are bringing jobs back from overseas because the quality is better here and the cost to move product from foreign lands is only going up.  Making stuff here is proving more economical.  This means an increase in demand for workers and increased demand for workers leads to better pay.  As employers have to lure workers from one job to fill another, our salaries increase.  A simple case of supply and demand.  And as wages improve and income rises, so does everything else, including real estate.

    I go into this rather extended history lesson to make the point that once the labor market breaks through the malaise of stagnant wages, our whole economy is going to get markedly better and owners of real estate will be one of the chief beneficiaries.  A little wage inflation is a good thing and not the enemy of real estate.

    I’ve heard many argue that the rocket ship rise in property values last year was an artificial boom; that it was fueled by investor cash and not an improvement in the real value of real estate or the economy.  Even more argue that as inflation kicks in and interest rates rise, the cost to purchase real estate will rise as well and thus prices will have to go down in response to lower affordability.  Further eroding property values, some even say, will be the alternative investments fixed income instruments like bonds will offer.  Investors will divest their real estate holdings in exchange for the greater, more liquid returns that higher interest rates offer via U.S. Treasuries and corporate bonds.  So the argument goes any way.  It’s an interesting argument, particularly in the short term, but it ignores the fact that we all need a roof over our head; that the population is not getting any smaller and that as our wages increase, so does our ability to afford a little more mortgage, a little more house.  Our ability to earn more has a direct impact on the value of real estate.

    This leads me to the following suggestion: Go buy a house, especially one needing work.  If you own one and would like a larger one, price your home to sell and upgrade.  Now is the time.  In fact now is an outstanding time because as inventory rises, (which is what has been going on for the past 12 months) there are more homes to choose from.  More homes means greater competition and like the worker competing with other workers for one job, too many homes means prices for some homes will come down.  Right now we are seeing that many of the homes coming on the market are coming on priced too high for their condition.  Where upgraded and turnkey homes are still selling with multiple offers, homes needing a little work are not.  They are priced too high and thus, sitting.  The sellers of those homes believed that their homes went up equally with turnkey homes and this is simply not the case.  Just as the demand for a computer scientist may be high, the demand for a field worker may not be.  So while there is a shortage of upgraded, move-in ready homes, there is no shortage of homes needing work.  These sellers are finding themselves competing for the same buyer.  This means for these homes you’ve an opportunity to negotiate a better price.  Once wages start to increase however, the demand for housing is going to increase and that darn supply and demand thing is going to lead to higher prices across the board.  Right now, there is an opportunity to buy a home with a little sweat equity built in.  You’ll have to negotiate of course, but with rates still ridiculously low, it’s an opportunity you won’t want to miss.

  • What’s My Home Worth? A Sensible Guide To Pricing A Home For Sale

    Posted Under: Home Selling in Westlake Village  |  June 9, 2014 7:52 AM  |  47 views  |  2 comments

    When I am asked to meet with a potential seller to discuss listing their home for sale, the first thing I need to understand is their motivation.  Why are they selling?  Could it be there have been changes in the family or changes in employment? Perhaps it’s as simple as the desire for a different location, amenity or maybe it’s health related.  The second thing have to do is to research the property because I am going to have to give an opinion of value.  Keep in mind that an opinion of value for selling is not the same as appraised value.  My opinion is designed to get the home sold for the highest price, in the shortest amount of time, for the least amount of hassle.  An appraisal is designed to give the bank a general sense as to the value of the security (the home) for their investment (your loan.)  So how do I approach this process?

    The obvious starting point is to look at the structure size and the property size and to find homes that are similar in nature.  This is called finding comparables or finding “Comps,” as you will often hear them referred to.  Comps are tricky business because no two homes are ever the same.  Still, it’s all we have to go on. Thus recently sold homes form the backbone of our property value assessment.  Closed sales however, only tell part of the story.

    Circling back, we need to consider the motivation.  Why?  A seller’s motivation has a direct impact on the value of their home.  Huh?  Let me explain… If a seller is not in any kind of hurry, our approach to pricing is going to be different from a seller who needs to sell quickly.  Naturally I will argue that every seller needs to sell quickly since the faster sale invariably achieves the highest sales price.  That said however, a seller that is willing to wait indefinitely for that “Buyer that just loves my home,” may find that in fact if they wait long enough, “The One” will come along and pay the asking price.  Most sellers don’t have the benefit of time, or at least don’t have the desire to see the process extend over months or possibly years.  So motivation does have a direct impact of the value in the context of selling.

    The next thing we have to consider are the pending sales.  These are the properties in escrow.  These are the sales that have taken place in the past 45 – 60 days.  They are important for the obvious reason that they are the most recent sales.  The problem here is that we don’t know how much they were negotiated for, rather only the asking price.  The number of days on the market will help us to guesstimate the sales price.  If a home is in escrow and sold in 5 days, we can assume fairly safely that the agreed price was at or possibly even above ask.  If that home on the other hand sat on the market for 120 days or longer and has already had several price reductions, it is fair to assume it did not go out at asking.

    Next I will consider the competition.  How many homes might be an alternative to the one I am selling?  This is significant because the more choices a buyer has, the more compelling my pricing has to be.  Remember in the context of selling, competition (or absence thereof) will influence our pricing approach.

    Once we have analyzed closed and pending sales and evaluated our competition, it’s time at look at absorption rate.  Absorption rate is found by taking the average time on market divided into the number of homes available; ie: 12 homes sold in 3 months, 12/3 = 4 are selling per month.  In other words, how quickly the homes for sale are being absorbed by the buyers gives us vital insight into how we will price ours.  For example if the avg. number of homes selling per month is 2 and there are 18 homes available, there are 9 months’ worth of inventory (18/2 = 9).  If like the earlier example the avg. per month is 4 then with 18 homes on the market the absorption rate is 4.5 (18/4 = 4.5).  It will take 4.5 months to sell all the homes on the market.  If our goal is to be sold in less than 60 days and the average is 135 days, we need to be priced lower or offer more than our competition.  By the way, the National Association of Realtors deems a balanced market, one not favoring buyers nor sellers, to be 6 months’ worth of inventory.  In our area I believe that magic number closer to 3 months.  California must always me in a state of perpetual shortage or else the value of Malibu wouldn’t be any higher than that of Dallas.  Notice that nowhere do I consider the “I need to get this much out of my home to sell,” in this discussion.  The “Need” discussion rarely has any relationship to the market value of a home, nor what it will eventually sell for.  That’s not to say it’s not an important consideration, it is, but it is not connected to my opinion of value.

    By now I imagine by you’re about ready to stop reading and hire a Realtor, which is exactly what you should do.  As a Realtor I do all this analysis for you and more. Because it’s not just comps and absorption rate that determines how to price a home for sale, but also understanding the overall market, buyer demands and amenity/condition evaluation.  Putting all these elements into a blender is basically how you figure out a sensible, approximate price, but putting that approximate pricing estimate together with a marketing strategy is exactly why you hire a professional.

  • When Is It Time To Replace Your Realtor?

    Posted Under: Home Selling in Westlake Village, How To... in Westlake Village, Property Q&A in Westlake Village  |  May 12, 2014 7:21 AM  |  119 views  |  No comments

    You’ve been on the market for many months and your home hasn’t sold.  Maybe you got some traffic in the beginning but what was a trickle, has now turned into a tortuous drip.  You’re getting pretty anxious because you really want to sell and it’s supposed to be a good market.  So why isn’t your home selling and is it time to replace your hired help?  This is a particularly difficult question for any home seller who hasn’t been able to get their home sold.  The closer you get to the listing expiration, the more you start thinking, “Is the problem with my agent?  Would I be better off with another company?”  “I really like them but…”

    Before we directly answer this question of replace or not replace, there are some things we need to examine first.  Let’s start with communication.  The number one complaint from sellers about their Realtor is their failure to communicate.  So ask yourself, “Does my agent reach out to me or do I have to call them?”  If the answer is the latter, you need to address this and it’s best addressed early on.  If you aren’t articulating this frustration, you need to.  If after doing so they still are falling short of your expectation, then yes, you probably want to start anew when the listing expires.  Mind you, being a Realtor I don’t say this lightly but from the beginning you need to lay out certain understandings and one of those is communication.  Establishing clear expectations is the first step to a successful relationship with your agent.  If you said to your agent, “Text me for showings” and they didn’t that’s a reason to be disappointed and if the problem were to go unchecked or unattended, that disappointment will lead to anger and frustration.  This is no way to maintain a quality working relationship.  That’s not to say that if they are communicating but you are micromanaging, that maybe you may need to look in the mirror and ask yourself, “Am I being constructive or do I have a need to control the situation?”  I have had situations where a certain seller is on top of my every move and that makes me less effective and the more tedious every conversation, the less I want to call or communicate.  This is just human nature and if love is a two way street, so is business.  However, in the end, if you are a micromanager, be honest with yourself and honest with your agent and if after you’ve done so, you still aren’t satisfied, you’ve every reason at that point to work towards terminating the relationship.  One thing to bear in mind here is that a listing agreement is a binding contract and you can’t unilaterally end it until the listing expires. If you are really unhappy and the agent is not responding or addressing your concerns, you should escalate and speak with the broker or office manager.  They have the ability to be an intermediary and even help assign another agent from the office whose personality more aligns with yours if the situation truly is untenable.

    The next thing you want to ascertain is the trust level you have with that agent.  Ethics and trust are absolutely essential to having an effective agent/seller relationship.  If you doubt the agent’s ethics or not sure you trust them, you are never going to be fully satisfied or happy with the outcome of the transaction. You will always have a gnawing doubt that your interests were not being fully considered.  Remembering that selling a home is a stressful process, the last thing you want to wonder is, “Is my agent really looking out for me or are they just thinking about their commission?”   Conversely, if you have a rapport with your agent based on mutual trust, respect and communication, the process though stressful, can be rewarding.  You must have trust in your agent.

    At some point you’ll want to examine is your agent’s job performance.  Every employer does this and so should you.  This review should be a sit down, straight forward talk between you and your agent, though it seldom is.  Rather what tends to happen is that time passes and the listing expiration sneaks up on you.  This however circles us back to communication issue and is your agent keeping you informed and giving you assessments of your progress?  Part of an agent’s job is to eliminate surprises. 

    “My agent didn’t bring me a buyer.”  This is a pretty common complaint when your home doesn’t sell.  While it is possible that an agent has any number of potential buyers for your home, more times than not they don’t have “the one” and the job of getting your home sold is really about getting your home exposed to as many potential buyers and agents as possible.  “Some agents have a bigger network and are better connected, right?”  True.  But that doesn’t mean they have your buyer now and have been patiently waiting for your listing to expire to show your home.  If they had a buyer, they would have shown them your home already.  In real estate one of the oldest tricks in the books is for an agent to tell a seller that they “have a buyer for your home,” get the listing and then mysteriously, that buyer never materializes.  Or worse, some unethical agents have been known to bring in an offer from a shill buyer and in some cases even open escrow only to have the buyer cancel.  I heard of this in our area only recently where an unscrupulous agent actually brought an offer on a home with her brother in law (of different last name) as buyer, opened escrow and then on the day the buyer’s contingencies were to be lifted, cancelled, just to get the listing!  By then it’s too late to change and difficult to prove any wrong doing.  Does it help to be with a larger office?  Not really.  All homes go on the same multiple listing service (MLS) so once listed, your home is exposed to everyone.  In the beginning if you were hoping to sell without ever actually having to go on the market, then a larger office might offer an advantage as a “Pocket Listing.”  But this typically sells you short on sales price since you are not getting exposed to every possible buyer, only those from that office.  A bigger office may have more agents, but the MLS has all the agents.  Most transactions involve two agents, two agencies.

    We started this discussion with the framework that the listing was coming to an end and you are considering making a change in representation since your home hasn’t sold.  Let’s assume you’re satisfied with your agent’s communication and that you trust them.  Since they didn’t have the right buyer for your home and it’s been sitting on the market unsold, it’s time to ask if they are marketing your home effectively and doing the things they said they would when they took the listing.  If your agent told you they would have professional quality photographs but took the pictures themselves with their iPhone, you have a legitimate gripe.  If they told you they would hold an open house every weekend and they aren’t, that’s not right.  If they said you’d be a featured home on Trulia, Realtor.com or Zillow and you look and you are not, they haven’t lived up to their promise.  Some agents will actually put their commitments in writing.  I include a partial list of my marketing plan in my listing presentation book and some agents will even make it part of the listing agreement itself.  However, if the agent is doing everything they said and you’re still not getting traffic, changing agents is not likely to have an impact.  Why?

    A correctly marketed home should have quality photographs, maybe video or virtual tours, be on all the websites and in some print media etc.  And so long as you’re paying a full commission and your agent isn’t a complete unknown/out of area agent or has a really bad reputation, one which gets them and your listing boycotted by other agents (yes this happens,) then the problem isn’t with the marketing and changing agents won’t help.  OK, what is the problem then?  When a home is in good show ready shape and has been marketed properly but still doesn’t sell, ultimately the problem is pricing.

    This argument seldom sits well with the home seller, but let’s face it, in the end the reason any home doesn’t sell is price.  Price for the condition, price for location, price for size, room count, amenities, lot size, priced for the current market.  It’s always price.  What distinguishes one agent from another is their market knowledge in setting the price, their ethics and the expertise to help you achieve the highest possible price by properly preparing your home for sale.  An agent must effectively present the home to the public.  (Effectively is the key phrase and that speaks to all the marketing we’ve already discussed.)  Changing an agent will not make your home more saleable though it might make you feel like you are doing something.  Since many sellers feel helpless when their home doesn’t sell, changing agents seems like their only recourse.  I compare this to a ball club firing the manager: even if they have a winning record and faced a lot of injuries, if they didn’t win the championship, sometimes the coach still gets fired.  The owner just has to shake things up.

    So before you look to fire your agent, ask yourself, “Do I like my agent and do I feel they have done a good job even though we’ve not sold” and most importantly, “Do I trust them?”  If the answer is yes, then you should probably relist with them when the listing expires.  If you aren’t satisfied with something other than the fact there’s little traffic or you haven’t gotten a satisfactory offer, then you should consider making the change.  Sometimes new blood can inject new life into a property.   More times than not however, it’s not the new blood that brings the offer, rather the price reduction that the new agent gets from you, that creates the interest, that sells the house.


  • For Sale By Owner

    Posted Under: Home Selling, Property Q&A  |  May 4, 2014 9:24 AM  |  97 views  |  2 comments

    Every once in a while when I am on a listing presentation, I get asked to explain why a seller shouldn’t just sell their home on their own?  Put another way, why they should have me do it?  I love this question.  That might seem a little counter intuitive; I mean, who wants to have to defend ones livelihood?  Many agents stumble here because they may not have thought it through enough to actually be able to verbalize the many benefits of hiring a Realtor to represent them.  But I like this question because it opens the door to a conversation I want to have and lets me explain what it is that I do and why I’m worth top dollar.

    The first and most obvious point I start out with is the marketing aspect of my job.  I’ll explain that my expertise on market conditions, market value and home preparation are going to help them price the home in a manner to get it sold for the highest price and in the shortest amount of time.  I’ll tell the seller how they’ll get a higher price by being on the multiple listing service (MLS) and exposing their home to the entire Realtor community and that this also feeds their listing into the online real estate sites like Trulia and Zillow and Realtor.com.  How it also goes into all the brokerages online sites as well like Redfin and Yahoo Homes amongst many others.  When asked about the For Sale By Owner or discount brokerage sites that will put a listing on the MLS for a flat fee, I must acknowledge that this is a vehicle for selling your home on your own, but I remind them that they’re still paying a commission by doing this.  I usually get the blank stare or maybe a “Huh?” to this reality.  “Of course you’ll pay a commission” I’ll say.  I’ll explain that to go on the MLS, you have to offer compensation to the cooperating broker.  It’s usually about here that the conversation will roll over to commission.

    When a broker lists a home for sale for a 5% or 6% commission, the listing broker only receives their portion, typically half, at closing.  So on a 6% commission agreement, the listing office keeps 3% and pays 3% to the agent bringing the buyer.  Therefore if a seller goes it alone or with the help of one of these discount services, they still have to pay the half of the commission that goes to the agent representing the buyer.  “Well what if I only offer 1%?  That’s $8,000 on my $800,000 home.  That’s a lot of money.”  I am happy to explain that while it is true that $8,000 is a lot of money, a qualified buyer is worth far more than that.  So when an agent is representing a qualified buyer, they are not going to accept less than they feel that buyer is worth and on an $800,000 home, that buyer is worth a lot.  “You mean an agent won’t show my home to their client for less than 2.5% or 3%?”  This is a great question and the answer may surprise you.

    Most agents are aware of the compensation being offered even if they say they don’t pay attention to commission, it’s only human nature.  If it’s a 2.5% commission, they will gladly show a home and usually speak well of the home if they believe it offers the amenities and value their client is looking for.  But if we are offering a compensation of 3%, I argue we might actually get them to work a little harder for us.  If you aren’t paying them a full commission, even if they are willing to show it to their buyer, how hard do you think they will work to point out the positives of your home?  Not very.  So paying the buyer’s agent’s commission is truly imperative.  That then leaves us with other half of the commission equation: the concept of paying for someone to represent you and help you sell your home.

    This usually brings me back to the marketing side of my job and I’ll remind them that I am not paid if I am not successful in bringing them a satisfactory offer.  Moreover that I will expend considerable money in the process of marketing their home, which I only get back via my commission at closing.  They don’t pay for any of that.  I go into all the other forms of marketing the home that I offer.  This starts with professional quality photographs.  I’ll typically ask if they have been online looking at homes, which of course they have and then if they judge a home at all by the photos they are looking at?  At this point the light starts to go on because they realize that to be successful they are going to need some great pictures online.  I then bring up things like a property specific website; enhanced presence on those online sites like Featured homes etc.; there’s my personal website and my company’s website; there’s other forms of online advertising and agent to agent communiques.  We’ll talk about print media and how I’m not a huge proponent of that as a marketing vehicle anymore, but that it is sometimes helpful when promoting open houses.  Oh yeah, open houses…

    A seller’s interest in open houses can really vary from seller to seller.  Some want them as often as possible while others don’t at all.  I usually explain that at minimum, we want one at the beginning since we never know where our buyer is going to come from and neighbors are often our best advertiser.  Plus there’s all those “Free Agents” out there that want to see the inside of homes, but aren’t yet affiliated with a broker and we want to expose our home to them as well.  Besides, how else are people going to see your home?  At this point I remind them that if they are without representation, they would be holding their own open houses and showings and letting total strangers into their home.  Moreover that they would have to restrict Realtor showings to the times that they’re at home.  So that would mean only weekends and evening after work.  Yikes!  What if a Realtor wants to show during the work week?  By restricting access, we make it that much harder to sell.  Having strangers in your home is kind of creepy; suppose they are just scoping out your artwork and things like jewelry?  Are you going to send your family out every time you show or is the whole gang going to hang about while a potential buyer is looking at your home?  How can they possibly focus on your home’s features with you following their every move?  It’s at about this point that the would be seller starts squirming in their seat because let’s face it, selling your home may sound easy enough until you start looking at the reality of what is entailed.

    “So now Mr. and Mrs. Seller, let’s say that offer comes in and you start to read the contract… the contract that’s 24 pages long… and the agent for the buyer is asking for your disclosures…”  Disclosures?  As a seller you have a responsibility to tell the buyer about your home.  “Everything?  You mean like the time the toilet over flowed and I had to fix the ceiling?”  Yes.  “What about the cat that always peed in the corner?”  Yup.  “Do I have to tell them about dad’s passing in the front bedroom?”  As you can see, a seller who goes it alone is going to have a lot to answer for.  Are you going to counter that offer?  Perhaps about now you start thinking that maybe you’ll just offer the buyer’s agent a percent to handle everything?  So now you are paying a buyer’s agent commission and a portion of a seller’s agent commission but you’re the one who had to determine how much the home is worth; what if you under sell?  Or worse and you over price and it doesn’t sell at all – which is usually the case with for sale by owner?  You also have to market the home yourself.  You don’t have anyone to advise you on the negotiation; you’ve still got the buyer’s inspection looming, termite, repairs, escrow, title, hazards disclosures, appraisal, the buyer’s loan approval to consider and monitor… what if the buyer tries to renegotiate or refuses to close?  Yeah, there’s a lot that can happen and a lot that can go wrong in a real estate transaction.

    Can you sell a home on your own?  Of course you can.  But here’s a little tidbit fact: When I list a million dollar plus home, I am almost never faced with defending my importance; that conversation is typically in the lower to mid-priced home range.  The reason is pretty obvious:  the more savvy the seller, the more they recognize the value in having professional representation.  Now not all Realtors are created equal, so you need to do your due diligence when you choose your representative.  In the end I firmly believe that you get what you pay for and there’s a reason phrases like “Penny wise, pound foolish” exist.  So if you’re thinking of selling or know someone who is, give me or someone like me a call; it will save you money not cost you money; your family will be thankful for it and so will you.

  • For Sale By Owner

    Posted Under: Home Selling in Westlake Village  |  May 4, 2014 9:22 AM  |  104 views  |  No comments

    Every once in a while when I am on a listing presentation, I get asked to explain why a seller shouldn’t just sell their home on their own?  Put another way, why they should have me do it?  I love this question.  That might seem a little counter intuitive; I mean, who wants to have to defend ones livelihood?  Many agents stumble here because they may not have thought it through enough to actually be able to verbalize the many benefits of hiring a Realtor to represent them.  But I like this question because it opens the door to a conversation I want to have and lets me explain what it is that I do and why I’m worth top dollar.

    The first and most obvious point I start out with is the marketing aspect of my job.  I’ll explain that my expertise on market conditions, market value and home preparation are going to help them price the home in a manner to get it sold for the highest price and in the shortest amount of time.  I’ll tell the seller how they’ll get a higher price by being on the multiple listing service (MLS) and exposing their home to the entire Realtor community and that this also feeds their listing into the online real estate sites like Trulia and Zillow and Realtor.com.  How it also goes into all the brokerages online sites as well like Redfin and Yahoo Homes amongst many others.  When asked about the For Sale By Owner or discount brokerage sites that will put a listing on the MLS for a flat fee, I must acknowledge that this is a vehicle for selling your home on your own, but I remind them that they’re still paying a commission by doing this.  I usually get the blank stare or maybe a “Huh?” to this reality.  “Of course you’ll pay a commission” I’ll say.  I’ll explain that to go on the MLS, you have to offer compensation to the cooperating broker.  It’s usually about here that the conversation will roll over to commission.

    When a broker lists a home for sale for a 5% or 6% commission, the listing broker only receives their portion, typically half, at closing.  So on a 6% commission agreement, the listing office keeps 3% and pays 3% to the agent bringing the buyer.  Therefore if a seller goes it alone or with the help of one of these discount services, they still have to pay the half of the commission that goes to the agent representing the buyer.  “Well what if I only offer 1%?  That’s $8,000 on my $800,000 home.  That’s a lot of money.”  I am happy to explain that while it is true that $8,000 is a lot of money, a qualified buyer is worth far more than that.  So when an agent is representing a qualified buyer, they are not going to accept less than they feel that buyer is worth and on an $800,000 home, that buyer is worth a lot.  “You mean an agent won’t show my home to their client for less than 2.5% or 3%?”  This is a great question and the answer may surprise you.

    Most agents are aware of the compensation being offered even if they say they don’t pay attention to commission, it’s only human nature.  If it’s a 2.5% commission, they will gladly show a home and usually speak well of the home if they believe it offers the amenities and value their client is looking for.  But if we are offering a compensation of 3%, I argue we might actually get them to work a little harder for us.  If you aren’t paying them a full commission, even if they are willing to show it to their buyer, how hard do you think they will work to point out the positives of your home?  Not very.  So paying the buyer’s agent’s commission is truly imperative.  That then leaves us with other half of the commission equation: the concept of paying for someone to represent you and help you sell your home.

    This usually brings me back to the marketing side of my job and I’ll remind them that I am not paid, if I am not successful in bringing them a satisfactory offer.  Moreover that I will expend considerable money in the process of marketing their home, which I only get back via my commission at closing.  They don’t pay for any of that.  I go into all the other forms of marketing the home that I offer.  This starts with professional quality photographs.  I’ll typically ask if they have been online looking at homes, which of course they have and then if they judge a home at all by the photos they are looking at?  At this point the light starts to go on because they realize that to be successful they are going to need some great pictures online.  I then bring up things like a property specific website; enhanced presence on those online sites like Featured homes etc.; there’s my personal website and my company’s website; there’s other forms of online advertising and agent to agent communiques.  We’ll talk about print media and how while I’m not a huge proponent of that as a marketing vehicle anymore, but that it is sometimes helpful when promoting open houses.  Oh yeah, open houses…

    A seller’s interest open houses can really vary from seller to seller.  Some want them as often as possible while others don’t at all.  I usually explain that at minimum, we want one at the beginning since we never know where our buyer is going to come from and neighbors are often our best advertiser.  Plus there’s all those “Free Agents” out there that want to see the inside of homes, but aren’t yet affiliated with a broker and we want to expose our home to them as well.  Besides, how else are people going to see your home?  At this point I remind them that if they are without representation, they would be holding their own open houses and showings and letting total strangers into their home.  Moreover that they would have to restrict Realtor showings to the times that they’re at home.  So that would mean only weekends and evening after work.  Yikes!  What if a Realtor wants to show during the work week?  By restricting access, we make it that much harder to sell.  Having strangers in your home is kind of creepy; suppose they are just scoping out your artwork and things like jewelry?  Are you going to send your family out every time you show or is the whole gang going to hang about while a potential buyer is looking at you home?  How can they possibly focus on your home’s features with you following their every move?  It’s at about this point that the would be seller starts squirming in their seat because let’s face it, selling your home may sound easy enough until you start looking at the reality of what is entailed.

    “So now Mr. and Mrs. Seller, let’s say that offer comes in and you start to read the contract… the contract that’s 24 pages long… and the agent for the buyer is asking for your disclosures…”  Disclosures?  As a seller you have a responsibility to tell the buyer about your home.  “Everything?  You mean like the time the toilet over flowed and I had to fix the ceiling?”  Yes.  “What about the cat that always peed in the corner?”  Yup.  “Do I have to tell them about dad’s passing in the front bedroom?”  As you can see, a seller who goes it alone is going to have a lot to answer for.  Are you going to counter that offer?  Perhaps about now you start thinking that maybe you’ll just offer the buyer’s agent a percent to handle everything?  So now you are paying a buyer’s agent commission and a portion of a seller’s agent commission but you’re the one who had to determine how much the home is worth; what if you under sell?  Or worse and you over price and it doesn’t sell at all – which is usually the case with for sale by owner?  You also have to market the home yourself.  You don’t have anyone to advise you on the negotiation; you’ve still got the buyer’s inspection looming, termite, repairs, escrow, title, hazards disclosures, appraisal, the buyer’s loan approval to consider and monitor… what if the buyer tries to renegotiate or refuses to close?  Yeah, there’s a lot that can happen and a lot that can go wrong in a real estate transaction.

    Can you sell a home on your own?  Of course you can.  But here’s a little tidbit fact: When I list a million dollar plus home, I am almost never faced with defending my importance; that conversation is typically in the lower to mid-priced home range.  The reason is pretty obvious:  the more savvy the seller, the more they recognize the value in having professional representation.  Now not all Realtors are created equal, so you need to do your due diligence when you choose your representative.  In the end I firmly believe that you get what you pay for and there’s a reason phrases like “Penny wise, pound foolish” exist.  So if you’re thinking of selling or know someone who is, give me or someone like me a call; it will save you money not cost you money; your family will be thankful for it and so will you.

  • Home Inspection: What To Expect

    Posted Under: Home Buying in Westlake Village, Home Selling in Westlake Village  |  March 2, 2014 10:05 AM  |  242 views  |  1 comment

    Most people I meet don’t know that in California, every home is sold as is.  It’s sort of a presumption that the seller will make repairs but this is not always the case.  Why should a seller make any repairs then, if they are not required to?  The obvious answer is that they want to sell the home and given the choice of some small fixes or having their buyer walk, sellers in general opt to make some repairs.  Another common misconception is that the inspection is always paid by the buyer.  While almost always true in Southern California, in the San Francisco Bay Area, it is actually the other way around.  In San Francisco for example, the seller will pay for the inspection, make any repairs they want and then include the inspection report and repairs made with the original listing information.  From there a buyer will probably not do a full inspection and unless there is something incredibly wrong with the property, write their offer as is.  It’s actually a fairer way to sell and buy when you consider the requirements of full seller disclosure and the oft misguided use of the Request For Repairs as a means for a buyer to renegotiate the original offer (by asking for some huge cash credit to close).

    When I have a buyer write an offer, we discuss the issue of inspection and disclosure.  I explain that the seller is required to disclose anything that can materially affect the value or desirability of the property.  I recently sold a home that the seller repaired a ceiling leak a week before we went on the market.  A pipe all of a sudden started to drip, a stain was formed and the seller repaired it.  In doing so they painted the spot on the ceiling.  Thus the repair was invisible.  Why they asked, should they tell the buyer about it then?  I explained that any buyer that would back out because of this disclosure, is the very buyer we want to tell, for if we didn’t and they found out later, we’d all get sued.  So tell them and let them back out if that’s what they want to do.  Disclosure is the best way to stay out of trouble.

    Every home, even a brand new one, should have a home inspection.  I tell my buyers that the inspection is our “first line of defense.”  If for example, on the inspection the inspector points out staining in the attic, this would trigger a roof inspection.  A roof inspection costs about $350.  If there is no evidence of leaking and either the home is less than 20 years old or the roof is, why spend the money?  If the inspector doesn’t find evidence of water intrusion, why do a mold inspection?  On the contrary if the find a sink appears to have been leaking for a long time, now a mold inspection may not be a bad idea.  If there’s no major cracking or all the doors close just fine, why pay $500 for a structural engineer?  You see, the inspector is going to go through home with a fine toothed comb.  In doing so they will find things and depending on what they find, will determine whether there’s a need for subsequent investigation and inspection.  That said, if a client has a child with asthma or some other specific health concern, things like mold inspections may be a good idea if for nothing else, piece of mind.

    How does one choose an inspector anyway?  Naturally I have my list of preferred vendors and more often than not my clients defer to my judgment.  Is there risk in this for me as the referer?  You bet.  However I believe that the risk is lowered by my knowing a host of good inspectors from which my clients rely, as opposed to the Yellow Pages, Yelp or “my friend is a contractor and he’ll check it out for me.”  A good thorough inspection should take about 3 hours on an average 4 bedroom 2000 square foot home and cost between $400-500.   If the home is a raised foundation it will be more.  If it significantly larger or has a pool it can go $600 and if it is a giant 7000+ square feet, expect around $1,000.  Interestingly I have seen inspections take as little as 45 minutes.  When this happens and it only happens when I represent the seller because I don’t use that kind of inspector, I tell my seller that this kind of inspection is great when you’re the seller, not so great if you’re the buyer.  Like a doctor or attorney or even a Realtor, you really don’t want to go with the cheapest one out there.  Money spent on an inspection is some of the best money you’ll ever spend.

    So what types of things typically show up on an inspection?   Obviously the age of the home has a lot to do with this.  A home built in the 1990’s is going to have different issues than one built in the 1940’s.  Where I sell, most of the homes were built after the 1960’s so by and large they have a lot of the same issues.  If it was a Viet Nam era built home, there is always concern over aluminum wiring.  Copper was in short supply in the late 1960’s early 1970’s and many builders turned to aluminum and a substitute.  Aluminum would be fine if it weren’t for the fact that it heats at a different rate than the electrical panel and this can cause a gap between the wire and the screw causing arcing and this can cause a fire.  Galvanized plumbing is notorious for building up deposits that eventually slow the flow of water.  Clay sewer lines crack; tree roots can be an issue in older homes too causing slow drains and back up.  What about in newer homes?  Typical problems here have to do with builder’s contractors who take short cuts or City inspectors who don’t read manufacturer specs.  For example many attic forced air units (furnaces), are set directly up wooden platforms.  Most manufacturers want a sheet metal barrier put down and metal supporting feet.  Is this something that is commonly asked for?  Yes.  Double lugging, though really common,  is not allowed either.  This is where the electrician put two wires on the same screw in the panel.  An easy fix but one that is important.  Sprinklers spraying the house, that’s a commons one.  Does the seller always fix?  Not so much.  Water heaters, air conditioning, the list of possible corrections is seemingly endless, so where does a seller draw the line and what should a buyer be asking for?

    I always advise my clients that “health and safety” is and should be a point of discussion.  If something is a fire hazard, could cause mold or cause someone to get hurt, these are things a seller should be responsible for.  Cosmetic things like bad caulking are Ok to ask for but cracked tiles, chipped stucco or a difficult to operate door handle, again, not so much.  Do buyers sometimes ask for the moon and stars on their request for repair?  Yes they do.  How a seller responds really depends on the market condition at the time; is it a buyer’s or seller’s market?  Also how difficult are the fixes?  Many times the nickel and dime things are one afternoon with a handyman and a few hundred bucks.  Hardly worth fighting over.   Your agent should be there with you and have a working knowledge on the costs estimates or at least have the trades available to refer you to.

    So if you’re buying be diligent and practical.  If you are a seller, ask yourself what you would want the seller to fix if you were the buyer.  I tell every buyer and seller that there are two negotiations with each transaction: first is price and terms; (what’s the price, how much down, what’s excluded, when do we close etc.?)  The second is the request for repair.  It’s always the more difficult of the two.  But if you keep your eye on the prize, the prize being a successful close, the repair request is manageable and a smooth transaction that much more likely.

  • Thoughts On Choosing A Realtor

    Posted Under: Home Buying in Westlake Village, Home Selling in Westlake Village  |  February 16, 2014 10:16 AM  |  230 views  |  1 comment

    A friend called me up the other day asking me to help her sell her home.  I told her that even though I could technically list it, I really wasn’t the right guy for the job; that someone local would be better.  She then asked me for a referral to a Realtor in her area.  She knows I have been selling homes since 1990 and wanted me to help her make the right choice.  I asked if there was someone she knew specializing in her neighborhood?  Of course there was, she said, but in this case she wasn’t sure she wanted them because it was a father-son team, with the son having taken over the dad’s business and that the dad was mostly retired. Thus I set out to find the best match for her, with little or no knowledge of whom to interview.  This is a position that many would be buyers and sellers find themselves in: who to work with on this most important transaction and how to go about selecting the right representative?

    The first thing I began my search with was finding a CRS, a Certified Residential Specialist.  In full disclosure, I am a CRS.  So what is that?  A CRS is a designation for an agent or broker who has sold $25M in real estate over a 5 year period.  Pretty easy for a decent California Realtor, not so much if you are in most of the other states.  A CRS also has to complete 75 transactions within that same 5 year period.  Easier if you sell $75,000 condos in Ohio, not so easy in place like Southern California.  But that’s not all. A CRS also has to take a slew of 2 day CRS classes as well.  So to become a CRS designee, you have to have completed additional educational reuirements, plus achieved a certain dollar and sales volume.  Fact: CRS represent just 4% of all Realtors yet they handle 80% of all transactions.  In other words, a CRS is a pro’s pro.

    The second thing I look for is broker vs. agent (and yes, I am a broker too).  Though most Realtors are commonly referred to as a “Broker,” in fact most are only agents.  The difference?  Education, responsibility and liability.  To become a broker in California, an agent must have either a college degree, be an attorney or have been an active practitioner for at least 2 years.  A broker has to take a ton of additional classes and only then, be eligible to sit for the 2 part, 8 hour State Broker’s Exam.  A broker can hang their own shingle and sell whereas an agent must practice under the supervision of a licensed broker.  There’s a joke I like to tell my clients when I meet them for the first time: What’s the difference between a California driver’s license and a California real estate license?  Not everyone in California has a driver’s license.  Sadly this is not entirely untrue, however a broker’s license is down right uncommon and frankly hard to get.

    Once I have pared my list to brokers and Certified Residential Specialists, I look at them on the web.  I want to see if they have a site.  I want to see if they are active on Trulia and Zillow; I look them up on Facebook, LinkedIn and Yelp.  I’m looking for someone who is somewhat on top of social media.  This is especially true for sellers because the days of putting a sign in front, placing the listing on the MLS, and getting top dollar are long gone.  Today’s agents need to be savvy, use professional photos, use social media to market properties and even use video through vehicles like YouTube.

    Premier Service is another tool to use.  Premier Service is like the JD Powers for the real estate industry where clients review their experience with their agent.  The information is compiled by a neutral third party and then publicized. I have been a Diamond Award winner in the past, the highest possible ranking, but it’s very hard to achieve that distinction every year.  It’s requires great reviews, a minimum volume and a high percentage of client participation.  Many real estate companies don’t want to be responsible for dealing with bad reviews so they don’t participate in this industry leading survey group.  If nothing else, Premier Service is a good tool to weed out certain agents and agencies.

    Once you’ve done your research, it’s time to begin the interview process.  Some people are going to want the “heavy hitter;” the agent that is doing 75 or more transactions a year.  While there is nothing wrong with this approach, I tend to prefer the agent who is going to provide more personal service.  I mean let’s face it, if I’m doing 100 transactions a year, you’re dealing with one of my assistants and not so much me as I am out soliciting new business.  Their operation may be completely professional, but I prefer a more boutique approach.  By the same token, I don’t want someone who used to be really busy and now is semi active.  You’ll find this a lot in real estate.  It’s said a Realtor never retires, they just fade away and I don’t want that agent either.  The internet and social media research should help to weed this type of agent out.  I also need to look at their dollar volume productivity.  If I am selling a $700,000 home, I probably do not want someone who is selling $75M a year. The reason is that this type of agent is likely specializing in the high end and wouldn’t be attentive enough to my smaller, lower priced property.  Conversely if I have a $5M estate home, I don’t want the agent who’s not doing big dollar volume because a property like this costs significant money to properly market.

    Lastly is the issue of personality.  This is pretty hard for me as a referring broker to assess, but something you are going to want to take into account.  My wife for example will run from anyone who’s a fast talking salesperson.  She wants someone who listens and carefully explains the process and importantly doesn’t talk down to her if she doesn’t understand something.  If you don’t feel a connection with the agent you are interviewing, as hard as it is, you need to thank them and let them know that you don’t think it’s a good fit.  When you hire someone to sell your home, the listing agreement will lock you up for 6 months or longer so you have to feel good about the person you hire.  Can you get out of it?  Maybe, but a contract is a contract so you don’t want to assume you can cancel at will.  When you engage an agent to help find a home, though such a contractual agreement is not that common, it’s still not easy to fire an agent.  In fact it’s downright awkward.  Honesty is always the best policy, so if you start feeling that your agent isn’t doing what it is you want, let them know what you’re expectations are and if you don’t like how they respond, email them and let them know, you’ve decided to go a different direction.

    Though this process as I’ve described it is a bit time consuming in the beginning, it will pay off in the long run with better satisfaction and most importantly, success. Thankfully with all the information available for you to do research, hiring the right agent has never been easier if you just take the time.

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